Devouring the Leviathan: fiscal policy and public expenditure in Colombia

Fernando Estrada

MPRA Paper from University Library of Munich, Germany

Abstract: Overall, this paper presents a white swan that seems to confirm the hypothesis of Alesina / Tabellini / Campante (2008). Fiscal policy in many developing countries is procyclical. Specifically, the former may explain monetary policy failures associated with problems of political agency. And in this case, the trend of the cycles is caused by voters who seek to devour the Leviathan by reducing their incomes. In these cases, voters observe the conditions of the economy, but not willing to cover the costs of corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation: Procyclicality of fiscal policy is more pronounced in more corrupt democracies.

Keywords: Colombia; procyclical economy; tax power; redistributive justice; state controls (search for similar items in EconPapers)
JEL-codes: A1 A10 B22 E6 E60 E62 E65 H2 H23 H5 H7 H70 H71 N46 (search for similar items in EconPapers)
Date: 2010-04-08
New Economics Papers: this item is included in nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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